How is value creation and organization design affected by digitization? What are the opportunities and challenges that digitization presents?

In most industries, the competitive landscape is rapidly changing and, as a result, companies are speeding through their life cycles at an unprecedented pace. Digital is the main driver of the current changes. It affects all aspects of how customers behave and how companies create and capture value.

Many start up companies use digital technology to build new products and business models that disrupt how we do business, and take customers away from firms that can't change or adapt. Established businesses understand that digital technology can help their businesses with greater speed to a lower cost, and in some cases they invite their customers to co-design and co-produce their products and services.

The changes we are seeing now calls for models where we start looking at and trying to understand what business do, what they can do and do we have the tools to engineer the new businesses. Øystein D. Fjeldstad and Knut Haanes have highlighted these questions in the chapter Value Creation, Business Models and Organization Design in a Digital World in the anthology "At the Forefront, Looking Ahead", published in conjunction with BI's 75th anniversary in 2018.

You can also hear more about the theories of Øystein D. Fjeldstad in a lecture video presented at the bottom of this article.

The Digital Organization

The digital organization is a powerful combination of:

  • Human and digital agents working together
  • Technologies that can potentially enhance everything - products/services, internal operations, relationships with customers, etc.
  • Members' ability to self-organize, thus saving many of the costs og hierarchy and enabling collaborative activities

An example of a digital organization is Google. Google organizes itself into flexible, diverse, and modular units of employees that can be reconfigured quickly. To enable cross-functional collaboration. Google fosters a "marketplace of ideas" in which briefs about new ideas and projects are published internally. Employees can vote for the most promising projects and choose which ones to support with their time.

Digital is more than analytics

  • Digital is the main driver of the current changes upending the business world. AI is an important part, but digital is more than analytics
  • We believe that business leaders need to understand clearly how digital enables more effective and efficient business models
  • Digital transforms organizations. It may radically transform the mechanisms by which activities and resources are coordinated and controlled. We therefore also belive that business leaders need new models for organizing and leading in a digital age

References:

Øystein D. Fjeldstad and Knut Haanes, Value Creation, Business Models and Organization Design in a Digital World

Book chapter in Sasson (Amir (editor): At Forefront, Looking Ahead, Universitetsforlaget. Scientific anthology published on the occasion of the 75th anniversary of the BI Norwegian Business School.

Value Creation and Business Models in the Digital Age

Questions about this article? Other questions? Contact BI Business Review

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